IAG reached a deal worth 172.5 million pounds ($273 million)to buy its smaller loss-making rival late last year aftertrumping Virgin Atlantic Airways. Bmi's mainattraction is its holding of slots at Heathrow, where it is thesecond-biggest operator behind BA.

The European Commission said IAG's concessions, which alsoincluded a pledge to carry connecting passengers to feed itsrivals' long-haul flights, were sufficient to addresscompetition concerns.

"The commitments package includes an appropriate number ofvery sought-after slots at London Heathrow as well asfar-reaching feeder arrangements as regards connectingpassengers," EU Competition Commissioner Joaquin Almunia said ina statement.

"We are therefore satisfied that the competitive dynamicswill be maintained so as to ensure choice and quality of airservices for passengers," he said.

IAG said the decision to clear the deal would be good forthe UK economy.

"This is great news for Britain. Over time we will launchnew long-haul routes to key trading nations that are currentlynot served from Heathrow while supporting our short-haulnetwork. This is good for UK business and UK consumers," IAGChief Executive Willie Walsh said in a statement.

Shares in IAG closed up by 0.2 percent to 178.90 pence onFriday.

Twelve slots ceded by IAG are for some UK domestic routesand other European routes. Two others will be leased toTransaero for flights to Moscow.

IAG currently has a 43.1 percent share of the take-off andlanding slots at Heathrow. Together, IAG and bmi have a combinedshare of 53 percent of the airport's slots.

Virgin has urged EU regulators to block the deal, saying itwould distort competition in British aviation.